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Communications Regulation (Postal Services) (Amendment) Bill 2016: Second Stage (Continued)

Wednesday, 18 January 2017

Dáil Éireann Debate
Vol. 935 No. 1

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(Speaker Continuing)

[Deputy Sean Sherlock: Information on Seán Sherlock Zoom on Seán Sherlock] The answer is that clearly it has not done so. If it had, we would not be here now. That places a significant burden on the Members of this House who are genuinely trying to ensure a future for An Post but who are also trying to protect consumers against undue and unfair price increases. There is something of a Hobson's choice. The 2011 Act is clear in respect of An Post's obligations to the universal postal service and compliance with price affordability, as I have said. An Post must comply with the price cap. It is very tempting to ensure such a regime is not undermined or changed so as to protect consumers and speak to the public interest.

Price increases lead to flows towards electronic means of communication. This is well documented. The price elasticity affecting the cost of postage is negative, as we know. Where one keeps increasing the price, one reduces the demand, and the consequent revenue loss puts An Post in an even more precarious position. The price cap mechanism employed by ComReg is arguably a protection in more ways than one. It regulates price and, in doing so, ensures volume is theoretically maintained to keep An Post viable.

The technical challenges faced by An Post in this electronic age are well documented. The availability of electronic substitutes has resulted in diminished mail volumes, thereby affecting revenue streams. Corporate behaviour is changing and entities such as Bank of Ireland are increasingly moving their communications with clients to an online format. Social welfare contracts constitute another case in point. Public finance pressures are also influencing behaviour in respect of funding deficits in the postal sector right across the European Union.

The recent Kerr report and post office network business development group recognised the worth of the post office network. The report made 23 recommendations. One must ask again why they have yet to be implemented in view of the fact that the group was established on foot of the recommendations of a Cabinet committee on social policy. The Kerr report recommendations also form part of the 2016 programme for Government.

The chairman of An Post addressed the Dáil committee last July. He spoke about the very precarious financial position of An Post. He reiterated that in the past 24 hours in regard to the universal service obligation. Let me refer to the 2015 annual report of An Post. The opinion was articulated through our own research entity in the Houses of the Oireachtas. The report states mail accounts for 63.7% of revenue and that the extent of the decline is articulated through losses of over €340 million. It is stated that, of the 580 million items handled by An Post in 2015, 60% related to USO products while letters accounted for 90% of domestic USO volumes and 74% of international outbound USO volumes. Therefore, bearing in mind the ComReg report, to which I have referred, we know that the deteriorating liquidity of An Post is a matter of grave concern. The amount of cash in hand and in the bank fell from €350 million to €50 million between 2008 and 2015, as I understand it. I am sure the figure has diminished even further. ComReg tells us that 80% of postal transactions are business-related and that 30 large postal service users, including banks, utilities and Government, account for the vast majority of mail sent.

I referred to Bank of Ireland as an example of just how much mail has reduced in such a short period. If volume has reduced and if the current cap is changed or goes, there will be a serious danger of rising costs for customers and SMEs, in particular. In this scenario, price increases will result in a further decline in revenue, precipitating the demise of An Post over a long period. If we do not arrest this decline now, we will do a disservice to present and future postal service users because the service will not exist in large swathes of the country.

Throughout the European Union, there are examples of where the universal service obligation has diminished to an unsustainable level. Monday to Friday deliveries have ceased in some instances. Post offices do not exist anymore in Sweden. Supermarkets and newsagents act as postal service agents. They behave like post offices and act as collection points. Letters are delivered but packages and parcels have to be collected.

It does not take a genius to figure out that if An Post's cash reserves are in such a perilous state, something will have to give. It is not beyond the bounds of possibility to envisage a time when the Monday-to-Friday delivery as we know it may become a thing of the past. There is a provision in EU legislation that could be helpful to An Post. It refers to services of general economic interest - I am stating this specifically because I hope the Minister and his officials will take on board this concept, which is real - or economic activities that allow public authorities, namely, the Irish Government, to identify as being of particular interest or importance to citizens and that would not be supplied if there were no public intervention. Examples are transport networks, postal services and social services. In practice, this could mean that the Government could specify that a particular service be provided through the post office in a manner that is required by citizens and argue that no private supplier could do the same. In other words, the Government could utilise the EU provisions in regard to services of general economic interest to channel certain Government services through the post office, thus increasing footfall and revenue to the post office. Opportunities to do this in the past have not been taken, to the detriment of the post office network. The Government, if it is genuine in its commitment to the future of the post office network, must utilise all such future opportunities to use the services of general economic interest. If one marries this element to the Kerr report recommendations, one notes that there is complementarity. If it is the case that the mechanism of services of general economic interest cannot be utilised or mobilised in this instance, perhaps the Minister could make it clear in his response, or at some other stage. We firmly believe, however, it is a mechanism that can be used. It has been used by other countries, specifically with regard to postal services to ensure their protection.

There is a stark choice for this House to make. We note the concerns of postmasters and Age Action. The cash reserves of An Post are so precarious at this point that this action is necessary. It is the lesser of two evils. I do not believe we can wait for a review of An Post's own financial position to take place and for a report to be issued thereon with a set of recommendations. We are up against the clock on this one. I fear that if we do not support this legislation, the cash reserves are such that wages will not be paid and post offices will have to be closed. I do not want to exaggerate or sound alarmist based on the briefings I have received on this issue. It would be very easy for me to state that we have to protect consumers and ensure that there are no further increases in the cost of postage stamps.

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